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A complex 2021 but there’s a clear direction of travel for land & property in 2022

Covid-19 considerations have been the backdrop to land and property moves this year (2021) but the nature of Shouler & Son’s transactions have set the tone for the sector in the coming twelve months.

That’s the verdict of the firm’s rural, commercial and residential professionals in its annual market view and it’s a view supported by Shouler & Son’s farm machinery sales and auction room specialists too.

Challenges in 2022 look set to come in the form of high inflation, anticipated interest rate rises and regulatory reforms.

This is particularly acute for rural and farming interests who face wholesale changes in governance, policy and funding frameworks as the post-Brexit era beds down in the remainder of this decade.

Matters of tax - specifically Inheritance Tax (IHT) - and succession planning for farming business and property interests have been a considerable part of the firm’s rural professional team’s workload this year.

This has seen Shouler & Son working with farm and estate clients’ peer professional advisors to ensure forward-thinking for best property management. This involves issues such as title registration and ensuring the most advantageous position when it comes to new regulation and funding and revenue streams.

While big-ticket private sales of large farms have taken place in 2021, small parcels of land, amenity land and also woodland have contributed to much of the transactional work of the firm.

Motivated by a desire for ‘the good life’, these purchasers are farming-first time buyers - ‘FFTBs’. This is a trend the firm expects to continue in 2022 - and beyond - as the pursuit of open space of ones own for a post-pandemic future creates and drives a new type of buyer in the countryside.

Cross-fertilisation between the firm’s rural and commercial professional teams is ongoing. This has seen its commercial agency continuing to act on instructions of refurbished former agricultural buildings as they come forward for tenant occupiers as part of planned programmes of farm diversification.

Changes in lifestyle and shopping habits - already underway in the last decade - have been accelerated by Covid-19 and these continue to play out on the commercial property stage in facing 2022 and the second anniversary of the lockdown.

Working from home (WFH) has added a dimension to the nation’s online existence that has had the most impact on the office and retail property sub-sectors in 2021. Although, as the firm’s commercial professionals note, there are very local exceptions, such as Melton Mowbray town centre which has experienced significant retail footfall since September 2021.

These trends mean office and high street units are being re-purposed for hospitality and leisure uses that cannot be replicated online or accomplished through WFH.

This sees warehouse, depot and distribution as remaining the darlings of the commercial property sector. While Shouler & Son’s area of operation doesn’t encompass the ‘shedlands’ of the East Midlands, it has, in turn - and to scale - seen investor and landlord clients with light industrial portfolios benefit in 2021.

The firm’s own star commercial property performer of the year has been Rotherhill Business Park on Thorpe Road, Melton Mowbray. Of the 14 refurbished business units available on this mixed industrial and office scheme, the sale of 13 units will be completed before the end of 2021, with the majority negotiated by Shouler & Son’s agents on this joint agency instruction.

Lack of similar good quality stock for freehold sale in this sector to meet investor and owner-occupier demand, as well the paucity of the supply of business units to let in town or rural locations to meet occupier requirements, form the firm’s commercial agents’ lament in entering 2022.

The pandemic and the acceptance of WFH culture has played a significant part in shaping the regional housing market too in 2021. The pursuit - or realising - of a better work-life balance will continue to characterise the region’s housing market in 2022.

However, the residential sales and lettings sector is often the bellwether when it comes to wider property fortunes. And it’s Shouler & Son’s professionals here who strike a note of caution for the coming year in anticipating potential mortgage interest rate increases as a consequence of higher inflation.

Fiscal considerations - namely the Stamp Duty (SDT) holiday and its end - strongly influenced both the sales and lettings markets in the firm’s local areas of operation in 2021.

Tax changes regarding relief for second homes, introduced in 2020, and SDT remain live concerns for prospective residential landlords as we face 2022.

Job security concerns of tenants have made many reluctant to commit to new tenancies and change properties. Yet it is the lack of suitable rental stock to meet the quite high expectations of modern tenants that is the biggest brake on the normal ‘churn’ of this sector, according to Shouler & Son’s lettings experts.

That being said, standard rental property in Melton Mowbray remains to offer at least a five per cent return on investment over the past twelve months, with an equivalent percentage performance in capital growth.

Any increase in interest rates and mortgage rate equivalent rises are likely to affect first time buyers of mainstream properties and, could in turn, see them become or remain tenants in the rental sector.
Many Shouler & Son residential sales instructions attract buyers who are not in such an exposed position when it comes to any potential mortgage interest rate fluctuations.

Such buyers - often re-locating from London and the South East - have buoyed the market for character cottages in some of the most prized villages in Leicestershire, Rutland and Lincolnshire in 2021 and look set to remain a strong influence in the coming twelve months.

Instructions in this market sector this past year have regularly achieved well beyond the guide price under the firm’s agency. One cottage in the Wreake Valley, on which Shouler & Son’s agents raised the guide price considerably above that indicated by other agents on the appraisal of the micro-local property market, achieved a sale price of £20,000 in excess of the guide price on marketing launch.

The firm is already under instruction on a number of similar properties across this patch. In addition, its agents have active instructions in the first quarter of 2022 on a number of building plots and renovation development opportunities in ‘hotspots’, including the Vale of Belvoir.

In summarising, Shouler & Son’s market view of 2021 and anticipating the coming twelve months, Ben Shouler, managing partner, said, “Business during the past twelve months can be described as buoyant, complex and, often, very localised.

“There is broad agreement across our rural, commercial and residential professional teams that 2021 has signposted the direction of travel for the land and property market in the coming few years.

“In business culture, what was referred to as a ‘new normal’ in 2020 has now weathered 2021 and become a more embedded way of thinking about things as we face 2022.

“It’s been a year of adjustment and transition for the Shouler & Son business too.

“We have accelerated the digitisation of all aspects of our business processes and procedures - including our auction house offer - in the pursuit of continuing to give the best professional advice and service to our clients.”